Stellantis N.V.

Ladies and gentlemen, welcome to the Stellantis Third Quarter 2025 Shipments and Revenues Call. I will now hand you over to your host, Mr. Ed Dittmeier, Head of Investor Relations at Stellantis. Mr. Dittmeier, please go ahead.

Thank you. Hello, everyone, and thank you for joining us today as we review Stellantis' Third Quarter 2025 Shipments and Revenues. Earlier today, the presentation material for this call, along with the related press release, were posted under the investor section of the Stellantis Group website. Today, our call is hosted by Antonio Filosa, Chief Executive Officer, and Joao Larango, Chief Financial Officer. After their prepared remarks, Antonio and Joao will be available to answer questions from the analysts. Before we begin, I want to point out that any forward-looking statements we might make during today's call are subject to the risks and uncertainties mentioned in the Safe Harbor Statement included on page two of today's presentation. As customary, the call will be governed by that language. Now, I'll hand over the call to Antonio Flosa, Chief Executive Officer, Stellantis.

Well, thank you, Ed. And hello, everyone, and thank you all for joining us today. First of all, please let me to recognize our teammates that are struggling with the effects of the terrible hurricane in Jamaica and surrounding areas. We are very close to them. So let's get started. There are three important topics we want to cover today. First, our commercial plan is progressing with a third quarter return to top line growth. Second, I want to cover our recently announced $13 billion investment in our US manufacturing and product to explain the new opportunities it opens. And third, Joao will take you through the numbers we are reporting and give you our assessment of the second half 2025 outlook. So let's begin with a summary overview of the third quarter. Let's look at the performance, which improved as we progressed our commercial plans. Consolidated shipments and net revenue both increased 13% compared to the prior year, and we delivered a global sales performance that was 4% higher year over year. That sales performance included a sequential increase in market share in North America and even stronger trends in the United States. At the same time, we also saw some share contraction in Europe for reasons I will explain shortly. Second, we announced our $13 billion U.S. investment program, which directs significant capital into our U.S. products, plants, and production. For customers, this means we are re-entering segments where we have been missing for too long and extending powertrain choices in ways we know our customers love. Lastly, we are confirming our second half 2025 financial guidance, which implies continued sequential improvement. And at the same time, we will continue what we started in the first half to structure our business for profitable growth. Now let's go into more details on our commercial progress. First, products. This year, we set out a plan to launch 10 major new products. In the third quarter, we launched the fifth and the sixth of those, the Citroën C5 Aircross and the DS number eight, both on the rapidly scaling Stella Medium platform. We have four important remaining products scheduled to launch very soon. two in North America and two in Europe. And I will detail why each can be very impactful. So let's look at the two launches in North America. The Jeep Cherokee marks our return to the midsize SUV market in the US, the largest vehicle segment, around the fifth of total volume of the industry. Jeep Cherokee will bring us back into that huge mid-SUV segment with a very competitive design and capabilities. For example, the new Cherokee has significantly more room and the brand's first-ever full hybrid powertrain, dramatically boosting fuel efficiency and range. Moving to Dodge, we will soon begin production of the exciting IZ Charger 6-pack, in both two- and four-door configurations, after more than two years' absence. The initial Scat Pack high-output two-door trims sold out the entire 2026 model year when we opened for orders. Now, let's go to Europe. The Jeep Compass has had considerable success in the past. This new generation Compass, built on the Stella Medium platform, features three powertrain options, BEV, PHEV, and hybrids for the first time ever. And then the Fiat 500 Hybrid, one especially close to my heart as an Italian, which will enable this very successful nameplate to appeal to a much wider audience than it could be as a BEV-only product. Now let's look closer at North America. This was a very exciting quarter, with market share in the U.S. starting to improve, a threatened order book, and strong execution of the new product pipeline. U.S. sales rose 6% versus the prior year, with several Jeep products, Wrangler, Gladiator, and Wagoneer showing solid gains. Our new Ram Express and 1500 ME V8 variants began shipping. These products are likely to show a bigger sales impact in the fourth quarter as availability on dealer lots increases. Since announcement, we have received more than 43,000 dealers' orders. And in fourth quarter, we are launching our updated Jeep Grand Wagoneer Live JSUV, and that all new Jeep Cherokee midsize SUV. So our momentum in the U.S. is starting to pick up even before the very important new U.S. investment program that I will discuss shortly. Now to Europe. Here we are making solid progress executing the product plan, but the contest is tough with softer volumes in the French, Italian and light commercial vehicle markets, where we are the biggest player. Due primarily to these market mix headwinds, our third quarter EU 30 market share was down 70 basis points versus prior year. We are taking the necessary step to earn that back. In the A segment, we will be introducing the Fiat 500 hybrids, where we see significant pent-up demand, especially in Italy. In the B segment, we are continuing to ramp up the new smart car platform products. Next, we will launch the IZ version of the Fiat Grande Panda. And in the C segment, we will launch soon the Jeep Compass. At the same time, together with other members of the SIA, we are heavily engaged with European policymakers to define and implement urgently needed reforms to revitalize the European auto industry. I believe there is a strong cross-industry consensus that the rules need to change and change quickly. Last quarter, I highlighted six near-term opportunities we had to improve profitability, expanding new products, changes for the new model year vehicles, and improve manufacturing and operational efficiencies. And I'm happy to report we are making good progress. The return of the ME V8 to the RAM 1500 light-duty trucks in the third quarter has delighted many of our customers. Next, SRT. We will bring an initial SRT model, the Dodge Durango SRT Alcat, to market in the fourth quarter. This will be the first of several SRT products that we will launch in the coming years. And we pointed to the ramping up of the four smart car platform products in Europe. In the third quarter, we increased production by 57,000 units year over year, which is exciting because we have approximately 120,000 orders for these vehicles in our order book. Next, I want to recognize our global ProOne commercial vehicle organization. This is a critical differentiation for us. Our great commercial vehicle products represent roughly 30% of our revenues in aggregate across the regions. In Europe, where we are number one in commercial vehicles with a solid 28% share, we are expanding our in-house customization options. In South America, we are also number one in commercial vehicles with a 31% share, We are expanding how we cover the mid-size pickup segment with the new launched Ram Dakota. And in Middle East and Africa, where we have a 20% share, we are launching local production of compact Fiat Vans in Algeria, a market where we have especially strong share leadership. In North America, where we have a 12% share, we have returned the Ram 1500 ME to the lineup, with more product actions to come. Now, let me touch briefly on a topic where we had some exciting announcements recently. We are excited by the ways technology and other dynamics are evolving to bring robotaxis closer to commercial viability. And we have announced a new collaboration with incredible partners. First, in October, we announced plans for Pony AI to adopt our fully electric LCD and jointly develop a program to launch a large Robotaxi PeopleMover. First prototype vehicles have already begun testing in Luxembourg. And then, just this week, we announced a collaboration with NVIDIA, Uber, and Foxconn to build fleets of Robotaxi based on our AV-ready platforms LCV, and Stella Small, targeting U.S., U.S. cities as first. We are extremely proud of the fact that these outstanding partners recognize the advanced capabilities built into our platforms, and I'm convinced that we can deliver substantial value in the emerging Robotaxi market and space. Now let's turn to our exciting investment news. Since I took the CEO role, I made clear inside and outside the company that the U.S. is a key priority for our success. Because when we are strong in the U.S., we are stronger and better as a company everywhere. The $13 billion we will invest in U.S. in the next four years is an investment in growth. This is the largest single investment in our history and a proud commitment to our U.S. people, plants, products, and communities. This investment will support the introduction of five all-new vehicles to U.S. plants and critically increase the level of U.S. production by 50%. I want here to recognize the administrations for their important focus on making pragmatic changes to regulations and tariffs. This is truly making the difference. So let's look more closely at how this investment enlarges a lot of opportunities for us. First, Jeep. Jeep is showing gradual improvement in U.S. in 2025, with quarter three sales growth of 11%, nearly double the U.S. market's growth of six percent. We also have an exciting quarter four planned with all new Cherokee and refreshed Grand Cherokee and Grand Wagoneer. To build on that momentum, the new U.S. investment includes plans to manufacture Jeep Compass and Jeep Cherokee in our Belvedere plant. This is critical to our strong offensive in the sub-40K U.S. dollar market. We are also investing to bring new technologies and other strong product actions to the iconic Jeep Wrangler and Jeep Gladiator. Our ability to serve the midsize SUV segment, the largest in the U.S. car market at 20% of total industry volumes, is extended in a powerful way with Jeep Cherokee and the very unique trail-rated Recon, which arrives in 2026. Overall, we are substantially stepping up our market coverage. The lineup is incredibly fresh and exciting, and our manufacturing sites will be ready to support higher demand. Now, RAM. I've spoken already about the strong product actions at RAM in 2025, which have helped as drive year-to-date retail sales 26% higher than last year. Now with the U.S. investment, we are opening up additional growth. First, we are putting in place a much more comprehensive product range. We have now set the plan to return RAM by 2028 to both the mid-size truck and large SUV segment. Tag on. We are leading on innovation. With this new large SUV, the Ram lineup will include two models alongside the Ram 1500 REV, both set to future our unique and very innovative range standard powertrain. Lastly, Ram will be showing even more of its trademark passion. with two new SRT performance products to be rebuilt in the coming months, each with utterly distinct value propositions. We are building the most comprehensive, the most innovative, the most passionate REM ever. Now over to Joao, who will take you through the numbers for the quarter. Thank you for now.

Thank you, Antonio. Good afternoon. and good morning, everyone. It's my pleasure to be speaking to you for the first time as Stellantis' new CFO. So let's start with the top-line figures. In the third quarter of 2025, Stellantis saw a return to year-over-year top-line growth. This ended a tough period of seven quarters of year-over-year declines. Consolidated shipments of 1.3 million units were up 13%, or 152,000 units. Most of the increase came from a 35% improvement in North America. That increase mainly reflect the benefits of normalized inventory dynamics. To elaborate, the prior year's shipments were heavily impacted by the second half of 2024's US dealer inventory reduction actions, which entail substantial factory downtime. Net revenues of 37.2 billion euros were also up 13% compared to the third quarter of 2024. That was driven by increases in North America, Europe, and Middle East and Africa. Let's turn to the revenue bridge to understand the 13% revenue increase in more detail. The improvement was driven mainly by the volume increase in North America and Europe. The 13% revenue increase year over year was driven mainly by the 13% volume increase. Other factors, including positive mix in pricing, were offset by FX headwinds. On volumes, in addition to the improvement of 104,000 units reported by North America, we also saw a net total 48,000 units increase from the other regions, with positive contributions in Europe and Middle East and Africa, partially offset by a moderate decline in South America. Next, pricing was up 2% compared to the third quarter last year. This was driven by gains in North America, where a roughly 4% increase reflected a low prior year comparison point when higher incentives to clear aged inventory were in place. We are also benefiting in 2025 from a strong inventory discipline. We continue to see ongoing pricing headwinds in Europe, but positive pricing dynamics in South America and Middle East and Africa. FX remained a material headwind in the third quarter, with €1.7 billion negative impact at the group level. This reflects the devaluation of the U.S. dollar, Turkish lira, and Brazilian real versus the euro. The U.S. dollar impact was by far the largest part of this. Now let's move to our regional segments. The third quarter saw year-over-year volume and net revenue improvements in North America, Europe, and the Middle East and Africa. Jeep Wrangler and Ram Light Duty nameplates, in particular, drove volume improvement for North America. Europe saw the ongoing ramp-up of European smart car products the second quarter of 2025, which helped sales. At the same time, we are seeing generally subdued registration volumes in Europe year to date. Middle East and Africa had a strong shipment increase of 21%, driven mostly by higher volumes in Algeria, where the company has significantly raised its local production. South America revenue was down 5%. This is in part due to tough comps compared to the third quarter of 2024. when Stellantis benefited from a recovery in Brazilian shipments that had been delayed by the second quarter of 2024 flood in Rio Grande do Sul. Turning now to inventories. The stock levels remain well managed at the end of the third quarter of 2025. Total inventories rose 4% sequential compared to the end of the second quarter. That is primarily due to higher stock in North America mainly to the ramp-up of HEMI V8 RAM 1500. U.S. dealer inventory days of sale remain the mid-60s, consistent with where we ended 2024. Moving forward, we expect to continue to see some absolute increase sequentially at the group level as we continue expanding the product lineup in the market. while the relationship to sales will remain relatively stable. Let me end this section with our 2025 guidance, which we are confirming in all respects. We expect the second half 2025 to continue the third quarter's return to year-over-year growth and to be above first half 2025 levels. Stronger volumes. and their contribution to improved industrial efficiency will put us in position to deliver low single-digit adjusted operating income margin in the second half. And we are working to deliver sequentially improved industrial free cash flow. Please note also, we have refined our projection for net tariff expenses for 2025, now approximately 1 billion euros. compared to the prior 1.5 billion euros. There's a few other things I'd like to touch on, which, while they are currently expected to have limited impact on the aforementioned second half guidance metrics, will likely affect other aspects of our second half financial results. First, as we indicated in July, We are engaged in the ongoing process of reviewing all aspects of the business as part of updating our strategic plan. This will likely lead to further charges in the second half. We expect that a large portion of the charges will be excluded from AOI to the extent that they are not indicative of our ongoing operations. we are in the process of updating how we estimate warranty costs. Our historical model was in line with industry practice and worked well. However, in recent periods, we've experienced cost inflation. While this change in estimate does not change the actual cash costs or their time, it is likely to result in a one-time charge, which would increase the level of balance sheet reserves. It is not expected to materially impact future period profitability compared to the 2025 run rate. Now, I'll hand the call back to Antonio for some closing remarks.

Thank you, Joao. Before opening to your questions, let me recap the key points from today's presentation. The third quarter revenue and shipment performances give an early signal that our actions are beginning to have a positive impact. You can see that in quarter three, we continued and accelerated the actions we started in January to correct past strategic and operational decisions. We quickly changed our organizational structure to restore proximity to our customers, dealers, and suppliers. We reconnected with our governments and regulators And we took important decisions, such as the product actions and major investments we discussed today, that have restored the freedom to choose to the very heart of our strategy. And lastly, confirming our second half guidance signals our belief in further, steady, sequential progress, quarter by quarter. That concludes our opening remarks. And so I would like to ask our operator to open the line for your questions. Thank you.

Thank you. As a reminder, to ask a question, please type pound key five on your telephone keypad. The next question comes from Jose Asumendi from JP Morgan. Please go ahead.

Thank you very much. Jose Asumendi from JP Morgan. Hello, Antonio, and very welcome. Joao. A couple of questions, please.

Antonio, certainly very exciting product launches coming through in North America and product refreshes. I was wondering if you could talk a little bit around how everything comes together when it comes to improvement of production capacity, utilization of the plants, and ultimately also improving pricing power. I know that it's a question that goes into 2026, but as we think about that short term and maybe longer term, what are you thinking in terms of those two metrics? And then second question, Joe, again, most welcome. And I was wondering if you could just give us a little bit of thoughts with regards to the key levers to improve free cash generation, maybe second half of the year, where you are hinting towards an improvement. Is there an opportunity to even generate cash in the second half Or if not, how do we think about the levers of improvement, second half versus the first half? Thank you.

Thank you, Jose, for your question. So I will take the first part of your questions, and then I will leave to Joao the second part of your question. So let me start, please, by saying that Today, in Q3, we celebrate a return to top-line growth, both in shipments and in revenue, after seven quarters of shipments and revenue decline. And also, since your first part of the question was around pricing power, we celebrate a favourable pricing for the first quarter after four quarters in a row of unfavourable pricing. and still we are very competitive into the market. So we believe we are very well positioning for future growth. And the way we want to address our future growth, even in price in power, is through a strategy that we are setting since the beginning of the year, and we are implementing since then, that is aimed to correct the past strategic decision. So we know that our major issues was product gaps, both in North America and in Europe, and we are implementing strong corrections in the short term and in mid-term around those. This is the case, for instance, of the reintroduction of the V8 engine of RAM 1500, which is a big volume of opportunities, but also very accredit on profit per unit. This is the case of the relaunch of the IZ engine for the muscle cars of Dodge. Again, both opportunity and profit opportunity. And this is the case of the launch of Jeep Cherokee in the largest individual segment in the world, which is the U.S. mid SUV segment that accounts for 20% of the entire industry in the U.S. This is the way we want to correct the past strategic decision, fulfill our product lineup with products that we know our customer wants, and grows both in volume and profit. This is the first part of my answer, and I will leave Joao to answer the second.

Thank you, Antoni. And hi, Jose. So on your second question on the biggest driver for the free cash flow improvement in the second half, it's primarily volume growth in North America. That is the primary driver for the improvement and underscores the importance of continuing to improve sales and volumes across our machine.

Thank you. Next.

The next question comes from Philippe Hochois from Jefferies. Please go ahead.

Thank you very much and good afternoon. It's Philippe Hochois at Jefferies. I have two questions. One is on the free cash flow dynamics because I understand the improvement from H1 to H2. you had negative 3 billion in the first half. It seems the market seems to be anticipating being 1 and 2 billion negative in the second half. But I just want to clarify, in the second half compared to the first half, your capacity utilization both in the U.S. and in North America and in Europe is probably up. And then trying to understand sequentially as well, as long as you have sequential improvement in your production, which I think is the case, and then normally working capital should be a significant contributor to free cash or to cash generation notably under the payables at the at the year end if you can help me make sure that i'm not wrong in my assumptions or i know you're not going to tell us what the cash flow is going to be second half i'm not asking just understand the dynamics that would be helpful the second question is on tariffs again thank you for clarifying that The $1.5 billion is lower. Some of that, I guess, is the timing of the tariffs on the full-size pickup. 2026 normally should be a higher tariff because you are going to have 12 months of RAM in Mexico, and you're going to have the reliance of the Cherokee. Then in 2027, you start having the benefit of reshoring to more production to North America, to the US specifically, both vehicles and engines. Is it right to assume that 2027, I know it's far away, but understand the dynamics, the 2027 tariff is going to be lower than 26 and potentially going back to the level of 2025. If you could help me understand that, that would be great. Thank you.

Yes, for sure. Thanks, Philip. On your first question on the free cash flow, the way that you're I think it's correct. The only piece of information is the second half is the first half. The region where we're going to see primarily the volume improvement is not dramatic. But other than that, your rationale is correct. On tariffs, I'll leave Antonio to answer the question.

So on tariff, my answer is the following. So our new strategy that have been started implemented since January has been meant to grow in our most important and largest market, which is US, but also as a positive side effect to reduce exposure against tariff, as you said, in the next years. Then obviously many things around this topic will happen, including the final settlement of USMCA, And we'll be ready to manage this new variable of our business equation as we are doing already. Thank you. Thank you.

The next question comes from Henning Kossman from Barclays Autos. Please go ahead.

Yeah, good afternoon. Thanks so much for taking my question. Can I just ask a little bit higher level? Your predecessor management had given us a bit of a steer saying that, you know, you've abandoned the all weather above 10% margin company narrative. I think the indication then became more like 6% to 8% perhaps in favor of growing volume, growing market share. I just wanted to ask again if you're still endorsing this kind of narrative now as a new now complete management team and what the underlying prerequisites for this are. Does that still imply something like 10% U.S. market share, 20% European market share? Does it require incrementally positive pricing from current levels? How does the reshoring in the U.S. fit into that? I would imagine it would come with higher depreciation. It would probably come with higher labor costs. If you could just give us like a sort of updated framework where you see the company going over the next few years in a sort of steady state. And then secondly, perhaps more again with respect to near term, free cash flow dynamics. I just wanted to clarify, I wasn't sure if in response to Philippe's earlier question, if you endorsed that minus one to minus two billion, or if you didn't mean to make any statement in that respect. Thank you very much.

So I'll take this second piece. No, I was not referring to the number, but the dynamics. We are The guidance that we have here, it's improvements versus H1, and that's what we are confirming. Thanks for asking for that clarification.

So thank you, Henning, and I will take the first part of your important question, and thank you for that one. So I believe that we will deploy, we are deploying already since January a strategy of growth that will deliver to the company a steady sequential improvement in all business KPIs quarter by quarter. This is our major target and this is what we will do. Now, what we understand is also that a 6% to 8% AOI business is a reasonable target for the mid-long term for this company. And we will have capital market day to discuss further on those objectives. The most important to us is now to deliver what we want to do, which is a steady sequential improvement quarter by quarter of all business KPIs. Thank you.

The next question comes from Thomas Besson from Kepler Shoebrew. Please go ahead.

Thank you very much for taking my questions as well. I have two, please. Firstly, for Antonio, I'd like you to talk more about the order intake, please. Could you give us a bit more granularity on the higher US order intake? What has been already the impact of relaunching HEMI on Q3 volumes with the initial reception of the Cherokee so far since the order intake has been open? How much benefit should we see in Q4 from this already? And when should we expect the full impact on your registration figures of these new products? Could you also give us an assessment of where you see the overall US market in Q4? I think Jim and Ford have talked about the 16 million SAR market. That would be useful. Thank you. And then the second question, probably more for Jo, on warranty cost and provision. You talk about a change in methodology that will drive from one of chargers. Can you remind us broadly the recall costs for 25 you expect versus 24 and 23 and confirm that setting up this provision for using this new way of assessing future recall costs has no cash impact on H2? Can you eventually make as well some comments by region, whether using different methodologies or whether costs vary a lot between North America and Europe in particular? Thank you.

Well, thank you, Thomas. And I will take the first part of your important questions and I will leave Joao answering the second part. Thank you for the two questions. So your first question. The dynamics of order collection in the US is going very well. Actually, it has been already 12 months in a row that we almost improved month over month, every month, our order portfolio. And the new products have been receiving very, very well and very strongly. So for instance, we have been accumulating more than 43,000 orders since we announced the run D8 legendary Hemi return. After announcing the Dodge muscle car charger with an IZ variant, we received the order that we need to close the full production up to next model year. And Jeep Cherokee announcement has been received very, very well and very strongly, both by customers, dealers, and also journalists. Not to mention the last presentation of the renewed Jeep Grand Wagoneer that also has received a lot of interest from dealers, from customers, and also from journalists. So we are very pleased to see our order book strengthening month over month. And this is very important to build upon for next year. Or your question about what industry we see next year, well, we see an industry that can be fought in around 16.4, 16.5 million units for U.S. This is my answer, and I will leave Joao answering to the second question you did.

Thank you. On the warranty, the first thing is that the methodology that we are reviewing would primarily impact U.S. and Europe. And the potential adjustments would be a non-cash provision in 2025. And the warranty cost, the total warranty cost for For the group in 2023, it was 8.9 billion euros. In 2024, sorry. Okay. Our corrections here. It was actually mentioned the balance sheet for warranty in 2024 was 9.9. 3 billion. And then on the details specifically to the recalls, we can follow up offline if it's okay, Thomas, because I don't have the numbers on hand here. Sure. Thank you very much.

The next question comes from Patrick Hummel from UBS. Please go ahead.

Yeah, thank you, Patrick, from UBS here. Also two questions from my end. The first one, Joe, your predecessor said that the second half AOI in North America should be positive. Now, this is nowhere in the deck. You had a good volume bounce over the first half in North America. So I was just wondering if that statement is still valid, that we should expect a positive AOI for North America in the second half. And my second question relates to free cash generation of the business. I appreciate today is not guidance day, but if we qualitatively think about the puts and takes for the cash flow as we're heading into next year, is it fair to say they're going to be higher investments year over year because you've got that $13 billion plan for the U.S.? I guess some of that capex is going to be incremental. And I'm still wondering if there are is a little trailing effect on free cash flow of any bigger further one-off announcements you might have in the second half of this year. So would you say with confidence that next year's free cash flow should be in positive free territory, or is that too early to say? Thank you.

Yeah, no, thank you for the question, Pascal. So first on North America, we are not providing guidance by region. But we are very focused on sequentially improving quarter by quarter, as Antonio mentioned. And then on free cash flow, despite the investments that we have announced in the U.S., we continue to focus on monthly investments around 8% of our revenue going forward. In relation to the adjustments that we are working on our strategic plan, We are still going through them and assessing the amount. So I don't have right now a final figure to understand the impacts for next year. And we'll provide an update, obviously, on that when we have the financials for the full year financials. Thank you.

Thank you.

The next question comes from Michael Foundoukidis from AutoBHF. Please go ahead.

Yes. Hi, Michael from Auto. Two questions on my side. First one on the U.S. investments you recently announced with plans to significantly increase vehicle production in the country. This could have some implications on your cost structure, I guess, and probably for your peers as well if they decide to go on the same path. Would you be eager to have your view on this? And do you believe that the pricing environment in the U.S. could be negative regarding new vehicle demand going forward? Or do you think that you can get some substantial, let's say, efficiency or competitiveness gains to offset this higher cost? And then second question on volumes, any comments you could share on October's or maybe Q4 trends, especially in the U.S.? ? You highlighted several times during your presentation that North American volumes were the key driver of the expected earnings improvement. Would you expect most of this improved momentum to come, let's say, in the next six to 12 months to be driven by retail or fleets or both equally? Thank you.

Thank you very much, Michael, for your two questions. I will answer both of them. On the volume, which is the latest question that you did on October and quarter four, yes, we see improvement on volume in North America, mainly U.S., because we will see the first positive impact of the launches. The V8 Ram 1500 is hitting now the dealer lots and is turning very, very fast. driven by a very strong pent-up demand. We will launch in production on Jeep Cherokee by the end of quarter four, so the first units will get to the dealer lots in that period. Obviously, the major positive impact will start being visible in quarter one next year when the largest portion of first unit builds will hit the U.S. dealer lot. The same story on the Dodge Charger IZ engine equipment that will be launched in production in the next months. Few units will get to dealer lots by the end of the year. Most of them will be hitting the dealer lots by quarter one next year. But yes, volumes will increase in US, will increase in North America. The first part of your question is about the investment that we are deploying in U.S. products and plants, and if it will have an impact on profitability. So number one, we see a pricing scenario for U.S. which is stable, and this is good news for us. Number two, we are working on cost efficiencies in all the globe, and obviously North American plants and U.S. plants. Number three, our investment is meant to grow in the largest and most important market that we manage. So we see just positive impacts out of it. Thank you very much for your question.

The next question comes from Horst Schneider from Bank of America. Please go ahead.

Yes, thank you for taking my questions and good morning or good afternoon. The first one relates to Europe. A colleague asked already about your expectation for the North American margins. In that context, I'm asking about Europe because you said in the H1 call that you aim to improve margins in Europe. You just said in the US also you want to improve margins semester over semester. Can you confirm that also for Europe maybe, because my impression is that Europe is getting slightly worse because you talk about increasing incentives and the BEV share is increasing. So therefore my question is what implication has that got on European profitability? Then the second question that I have is regarding working capital. Maybe you can explain how you expect working capital basically to develop into year end. So I would expect inventories to increase slightly. Maybe you can quantify that and trade payables also to increase. But in that context, with this Nixperia chip shortage, maybe you can say how your plans could be affected by that. So if there's any supply disruption coming up, if that plan would be at risk. And the last question that I have is on the $13 billion capex in the U.S., I wonder what that means in terms of restructuring need for Mexico and Canada. Not sure if you ever made a statement on that, if you plan any plant closures. But also, can you maybe split the $13 billion capex into capitalized R&D, but also into capex for property plant equipment? Thank you.

Okay. Thank you, Horst, for your question. clear three questions. So let me start answering with the European parts. So in Europe as well, we intend to do two things. Earn back the market share that we have been declining a little bit. And this is majorly driven by three product action. Again, product is at the core of our new strategy that we are implementing. So the first is in A segment. So in a segment we will launch in production in end of November, Fiat 500 hybrids. This is first a big volume opportunity, mainly in Italy. Second, profit per unit accretive, since for sure the hybrid version of Fiat 500 will generate to us a better profit per unit than the only BD version. The second product offensive that we have in Europe is around B segment, where we see a big volume opportunity in ramping up quicker the four products out of a smart car platform. Again, we improved our production by 57,000 units year over year. This is because we have a very strong order book that so far its 120K units orders collected in those four important nameplates. This is for sure a big volume opportunity that we have in front of us. The third product action is about the launch of Jeep Compass out of Melfi plant in Italy. Jeep Compass will be our strong player into the C-SUV segment in Europe, which is a big volume opportunity for us, but also profit opportunity for us. So for sure in Europe, we see a very nice future of volume growth, but we also see some important profit improvement driven by mix of models and mix of trends for each model. On Europe, I also want to commend a little bit the regulatory framework that we see today. So what we see in Europe is a regulatory framework and change it quickly. And we have been working very intensely with the ESEA organization, but not only, to promote our ideas of flexibilities that we want to introduce in this regulatory framework. And I've been very vocal in the press and with stakeholders about the four major points of our agenda, four major flexibilities that we would like to introduce. So on the $13 billion investment in U.S., which I believe is the second part of your questions, well, for sure we will use that to leverage the industrial capacity that we have in North America everywhere, for sure in U.S., but also elsewhere. where we are not announcing any planned shutdown. Finally, on the cash management, Joao, if you want to add your point, please.

So, hi, Horst. On the work capital, We do expect the dynamics that you mentioned due to the increase of volumes in North America, as I mentioned previously, and obviously any production disruption from now to the end of the year would have a large working capital impact because of the negative working capital positions that we have, right, as we usually collect the the cash as we invoice the vehicles and have payment terms with suppliers.

And your supply is safe until when? Volkswagen said the supply is safe until end of next week. Is it the same for you? That visibility is just poor for you as well?

so we are monitoring day by day on daily basis the the chip the chip situation from nexperia we have a cross-functional war room in the building where i'm sitting that has these as primary job and every day we are pushing actions and projects to to extend our our period so this is a management a day-by-day management of what is an industry-wide global issue.

All right. Thank you. All the best. Thank you.

Thank you very much.

The next question comes from Emmanuel Rosner from Wolf Research. Please go ahead.

Great. Thanks for taking my questions. The first one is just a point of clarification. These charges that you're taking in the second half, both for, I guess, turnaround actions, but also for warranty, can you just confirm again if there's any sort of cash impact that you should be thinking about associated with it and whether that would be included in the free cash flow reiterated guidance? And then just maybe a little bit longer term, you know, with these changes in U.S. regulations and in particular significant easing in the emissions regulations, what kind of opportunity does that provide for you? What kind of upside does that unlock? One of your D3 competitors is, you know, on the record saying that this is a multi-billion dollar opportunity. How would you plan to take advantage of it?

Okay, very good. And thank you, Emmanuel, for your two questions. I will start answering and then I will leave the stage to Joao. So obviously the new regulation that in our point of view are very pragmatic and are giving back the US customers their freedom of choice, we welcome them very well. We believe those represent to us a very good news for the short, mid, and long term. And we intend to explore all the value that we can extract out of those through mix. So in our product offer, that we are implementing since January. Freedom of choice is the mantra of our strategy. We are still a lot developing beautiful BEV vehicles for the customer that will prefer a BEV. That's why we are launching the Jeep Recon very soon in half one, 2026. But also we are enlarging our lineup with IZ introduction Hybrids introduction. This is the portion of the industry that is growing fast, the fastest one in U.S. And our first car will be the Jeep Cherokee full hybrid. And range extended introduction. This is very pioneeristic. We will be the first in the industry to launch in U.S. a range extended powertrain for a pickup truck, but also for a large SUV. Why do we keep our leadership as Talantis in the PHEV? So really freedom of choice is at the basis of the new strategy that we are implementing since January this year. Again, in answer to the past decision, strategic decision that we believe was important to correct, right? And this change of strategy is triggering the charges that Joao will detail a little bit.

Thank you, Antoine. And hi, Emmanuel. So the reviews, the strategic review and the product plan reviews that we are undertaking would lead possibly to project cancellations as we have already communicated the light duty BEV here in U.S. And the type of adjustments that we should expect on the project cancellations would be write-off of CAPEX and R&D capitalized spend, and also other program cancellations costs. And those other program cancellation costs, they could have cash impact, which we would expect to have limited cash impact in 2025 and more into the future.

Ladies and gentlemen, this was the last question. With this, I am handing over back to Antonio Filosa, Stellantis CEO, for his closing remarks.

Well, thank you. Thank you everyone for your time and focus on the Stellantis story. It was a privilege to update you on the company's commercial progress and its return to top-line growth. talk about why the investment in the US and the strategic updates we are making are so important, and reiterate our guidance, framing continued sequential improvement quarter by quarter. I look forward to updating you on our progress in the coming months and quarters. Thank you, everyone.